To avoid a financial market disaster, similar to that we have seen in 2008, the regulators eased requirements to boost start-up banks. Last year, Speaking at the British Bankers’ Association, the economic secretary to the Treasury announced the potential of 25 new banks. Within the last six months, six new banks have been approved with the view to increasing financial competition.
Whilst forecasts find it unlikely that any of these new ‘challenger’ banks will provide enough competition to decentralize ‘The Big UK Four’, they have been doing considerably well in tapping into specialist services. These have included funding for SME’s (small and medium-sized enterprises). Analysts remain sceptical that these banks will boost the competition. This is particularly so because the banks are beginning to tap into private equity investment specialization in exchanging loans for ownership of SME’s.
Despite this, challenger banks have remained positive about their place in the market claiming they provide an alternative to popular retail banks.